House of Representatives Committees

Preliminary Pages

Chair’s foreword

Australia is committed to reducing its greenhouse gas
emissions by at least 5 per cent below 2000 levels by 2020. This
lies at the heart of Australia’s efforts to introduce a mechanism to place a
value on greenhouse gas emissions and to achieve lasting reductions over time.

The Government has a plan to meet this target, and looks
beyond it to meeting longer term commitments to reduce our emissions, which is
set out in the 18 bills in the Clean Energy Legislative Package and the Steel
Transformation Plan 2011. The design of this plan has been the subject of
considerable public debate, discussion and policy development.

Our national commitment to reducing greenhouse gas emissions
is based on scientific evidence about the adverse impacts on our planet and our
nation of greenhouse gas emissions from human activity, both now and over the
longer term. The scientific evidence is well-founded, is accepted and continues
to be appropriately tested and scrutinised. However, the committee also noted
the many unfounded and unwarranted attacks that have been made on scientists in
the course of this debate.

As a nation, we have been discussing this issue for more
than 10 years. There have been numerous reviews since 1999, all of which have
concluded that a market-based emissions trading scheme is the most appropriate
way to act. Other countries are acting, through mechanisms designed to suit
their own situations, including through emissions trading schemes.

Since 2009, the Australian Parliament has considered
legislation to introduce a mechanism to put a price on greenhouse gas
emissions. The bills in the Clean Energy Legislative Package reflect this
decade of policy development, consultation and scrutiny.

In considering the Package, the committee has looked at
whether it provides a foundation for future economic growth, and for the
transition to an economy based on cleaner and more sustainable energy sources.
It is clear that a regulatory framework which provides certainty over time and
allows businesses to make the decisions about the most appropriate way to act
is preferable to one in which the government directs outcomes.

The consequences of not having a robust and certain
framework are clear: businesses will face greater risk associated with making
decisions and act – or not act - accordingly. The Package provides the
certainty that businesses need to make those decisions to ensure future
investment.

It is appropriate that people, in considering a reform,
should consider the short-term impacts it will have. The Government has
addressed these through a series of measures to provide transitional assistance
to emissions-intensive, trade-exposed industries, household assistance to low
and middle-income earners, and measures to improve energy efficiency and the
development and adoption of new technologies.

Beyond this, the longer term costs of not taking action must
also be considered. There are the direct economic consequences of squeezing the
task of meeting our 2020 commitment to reducing greenhouse gas emissions into a
shorter and shorter timeframe. But further inaction or delay also poses deeper
and more long-lasting implications for us all.

There is a clear and real detriment from not tackling the
task of greenhouse gas emissions reduction in a coordinated way. It will stifle
investment in cleaner energy and energy efficiency, delay the adoption of new
technologies and increase the ultimate costs we all must bear. The costs of
economic change are greatly reduced when they occur gradually, which the
Package proposes.

The impact of delaying investment in our energy sector is
real and serious. Individual Australians are now experiencing the costs of not
making necessary investment in energy infrastructure due to a lack of certainty
on addressing greenhouse gas emissions reduction. They have faced significant
increases in electricity prices precisely because we have not taken action, and
these impacts will continue. These costs far outstrip any impact of placing a
price on greenhouse gas emissions now.

In considering how to meet our commitment to reduce
Australia’s greenhouse gas emissions, we must ensure that the regulatory
framework does this at least cost, in a way which is tailored to the Australian
economy and which ensures that transitional costs are minimised. It is also
critical that this framework gives clarity and certainty for investors over
time, particularly in our critical energy sector.

The committee is confident that the Package delivers these
outcomes.

The committee received evidence from a range of businesses,
local governments and others who may be covered by the mechanism. While many
of these acknowledged the benefits that would flow from the full range of
reforms encompassed by the Package, including the recently passed Carbon
Farming Initiative, there was a degree of uncertainty about its application
from some groups.

This uncertainty is, to some extent understandable, given
the high level of much public discussion and the misconceptions about the
reforms that have gained currency. To deal with this, considerable effort is
needed in the implementation of the Package to ensure that those covered by it
are aware of its impacts, their obligations and the opportunities available to
them.

Much has been made about the potential impacts of the
Package on the Australian economy and individual households and businesses, and
this was reflected in the letters and emails received by the committee. In
many cases the claims made about these impacts are overstated, reflecting
misunderstandings or the arguments of specific interests.

The Treasury has conducted the most comprehensive modelling
exercise undertaken on this issue and its work is to be commended. While the
Treasury’s work has been scrutinised and criticised from a range of
perspectives, and others have attempted to quantify specific impacts based on
their own circumstances, no comprehensive alternative has been provided and
much of the commentary reflects the policy outcomes sought by specific
participants in the debate.

The Treasury estimates that the impact on Australian
households will, by and large, be modest, with price increases passed on by
business averaging 0.7 per cent in 2012-13. While price impacts in some
sectors, such as electricity, will be more significant, the household compensation
package is designed to mitigate the impacts on low and middle-income
households. Compared with the costs of dealing with the effects of rising sea
levels and changes to the suitability of land for agricultural use that will
occur under business as usual, these effects are small.

Based on the evidence before it and the material on the
public record, the Package represents the most comprehensive, efficient and
equitable basis for Australia to meet its commitments to reduce greenhouse gas
emissions and move to a clean energy economy. Businesses that are early
developers of clean technology have the opportunity to reap significant
financial rewards.

On behalf of the committee, I thank those that have given
their time to contribute to this inquiry through writing letters and emails, in
providing formal submissions and in giving evidence at its hearings.

Anna Burke MP
Chair

Membership of the Committee

Chair

Ms Anna Burke, MP

Deputy
Chair

Senator Christine Milne

Members

Mr Adam Bandt, MP

Mr Darren Cheeseman, MP

Mr George Christensen, MP

Ms Joanna Gash, MP

Mr Ed Husic, MP

Mr Bernie Ripoll, MP

Mr Tony Smith, MP

Mr Tony Windsor, MP

Senator Simon Birmingham

Senator Mathias Cormann

Senator Louise Pratt

Senator Anne Urquhart

Committee Secretariat

Secretary

Mr Stephen Boyd

Inquiry
Secretary

Mr David Monk

Technical
Advisor

Mr Simon Writer

Research
Officer

Dr Phillip Hilton

Administrative
Officer

Ms Natasha Petrovic

Resolution of Appointment

On 13 September 2011 the House of Representatives moved the
following resolution. On 14 September 2011 the Senate concurred with the House
resolution.

(1) That a Joint Select Committee on Australia’s
Clean Energy Future Legislation be appointed to inquire into and report on the
provisions of the following bills:

(2) That the committee consist of 14 members, four
members of the House of Representatives to be nominated by the Government Whip
or Whips, three members of the House of Representatives to be nominated by the
Opposition Whip or Whips, one Greens member, one non-aligned member, two
senators to be nominated by the Leader of the Government in the Senate, two
senators to be nominated by the Leader of the Opposition in the Senate, and one
Greens senator.

(3) That every nomination of a member of the
committee be notified in writing to the President of the Senate and the Speaker
of the House of Representatives.

(4) That the persons appointed for the time being
to serve on the committee shall constitute the committee notwithstanding any
failure by the Senate or the House of Representatives to appoint the full
number of senators or members referred to in this resolution.

(5) That the committee elect a Government member
as its chair.

(6) That the committee elect a member as its
deputy chair who shall act as chair of the committee at any time when the chair
is not present at a meeting of the committee, and at any time when the chair
and deputy chair are not present at a meeting of the committee the members
shall elect another member to act as chair at that meeting.

(7) That, in the event of an equally divided vote,
the chair, or the deputy chair when acting as chair, have a casting vote.

(8) That four members of the committee constitute
a quorum of the committee provided that in a deliberative meeting the quorum
shall include at least one Government member of either House and one
non-Government member of either house.

(9) That the committee have power to call for
witnesses to attend and for documents to be produced.

(10) That the committee may conduct proceedings at
any place it sees fit.

(11) That the committee have the power to adjourn
from time to time and to sit during any adjournment of the Senate and the House
of Representatives.

(12) That the committee report on or before 7
October 2011.

(13) That the provisions of this resolution, so far
as they are inconsistent with the standing orders, have effect notwithstanding
anything contained in the standing orders.

(14) That a message be sent to the Senate
acquainting it of this resolution and requesting that it concur with the action
accordingly.

List of abbreviations

ACCU

Australian carbon credit unit

ACTU

Australian Council of Trade Unions

AMEC

Association of Mining and
Exploration Companies

ANEDO

Australian Network of
Environmental Defenders’ Offices

ANREU

Australian National Registry of
Emissions Units

ASX

Australian Securities Exchange

BFVG

Bundaberg Fruit and Vegetable
Growers

CDM

Clean development mechanism

CEF

Clean energy future

CEO

Chief Executive Officer

CFI

Carbon Farming Initiative

CFMEU

Construction, Forestry, Mining and
Energy Union

CO2-e

Carbon dioxide equivalent

COTA

Council on the Ageing

DCCEE

Department of Climate Change and
Energy Efficiency

DIISR

Department of Innovation,
Industry, Science and Research

EITE

Emissions intensive trade exposed

EM

Explanatory Memorandum

ETS

Emissions trading scheme

GDP

Gross Domestic Product

GEDO

Greenhouse and Energy Data Officer

IGCC

Investor Group on Climate Change

LNG

Liquid Natural Gas

MPCCC

Multi-Party Committee on Climate
Change

NGERS

National Greenhouse and Energy
Reporting System

ORER

Office of the Renewable Energy
Regulator

OTN

Obligation transfer number

STP Bill

Steel Transformation Plan Bill
2011

TPI

Totally and permanently
incapacitated

UNFCCC

United Nations Framework on
Climate Change

Recommendations

Recommendation 1

The Senate and the House of Representatives pass the following
bills:

the
Clean Energy Bill 2011;

the
other 17 bills in the clean energy package; and

the
Steel Transformation Plan Bill 2011.

Recommendation 2

That the Government examine the proposals made by LPG
Australia concerning the treatment of LPG under the mechanism and, where
appropriate, refine the provisions to ensure that a carbon price is most
efficiently applied to all uses of LPG.

Recommendation 3

That the Department of Sustainability, Environment, Water,
Population and Communities proactively and transparently assesses the Green
Cooling Association’s recommendations such that they may, if appropriate, be
given Parliamentary consideration.

Recommendation 4

That the Government intensify its efforts to promote awareness
and understanding of the mechanism, including through:

working
with the Clean Energy Regulator to provide information and guidance to liable
entities about the mechanism and compliance with it in good time for the start
of the mechanism on 1 July 2012;

working
with representative bodies, state, territory and local governments, to inform
state, territory and local governments, businesses, community organisations and
individuals about:

Þthe
linkages between the mechanism and related initiatives like the Carbon Farming
Initiative; and

Þopportunities
for government support for and investment in clean energy and energy efficiency
initiatives.